Forecasting for Multiple Scenarios: How Much Should Your Plans Differ?

When forecasting for the year ahead, most B2B SaaS companies plan for multiple scenarios. This usually includes three separate forecasts:

A base plan 🆗
A best-case plan in which revenue increases 📈
A worst-case plan in which revenue decreases 📉

‍So, how different should those forecasts be? How extreme does a worst-case plan need to be in order to protect your company during turbulent times?

We’ll explore a couple of ways to think about your multiple-scenario forecast in this article.

First things first: a solid base forecast

Before we start to explore best-case and worst-case plans, you’ll want to establish your base forecast for the year ahead.

While no one can predict future revenue with 100% certainty, it’s important to think carefully about your unique business strategy, your current pipeline, your sales capacity, and your previous year’s performance to make your forecast as accurate as possible.

If you’re still working through this and are looking for advice on forecasting accurately, we dive deep into best practices for B2B SaaS revenue forecasting in this article.

A simple starting place for a multiple-scenario forecast: 20% in either direction

Once your base forecast is set, a simple way to approach your best-case and worst-case plans is to simply add 20% of your base plan’s revenue for your best-case plan and subtract 20% for your worst-case plan.

It’s not necessary to go too far beyond these bounds.

In truth, there are so many possible events that can occur that would impact your revenue in different ways, from a recession to a change in advertising costs to hiring a few superstar sales reps.

Don’t get caught up in feeling the need to prepare for every possibility!‍

A change of 20% in either direction is significant enough to help you think about your forecast in an impactful way, but it’s not so huge that you’ll have wasted time planning for extremely unlikely conditions.

The purpose of forecasting your worst-case scenario is not to create an entirely new line-by-line budget with huge spending cuts before the end of this year. It’s a thought exercise to help you understand how long your cash reserves will last in the event of a revenue downturn before you need to cut costs. If you’re not comfortable with the result, you can prepare yourself and your leadership team to consider reducing expenses if conditions worsen.

Another way to look at it: degrees of confidence

SaaStr recommends a similar but different approach to your multiple-scenario forecast: planning by degrees of confidence.

In this model, you should set a base forecast that you have 60% certainty you can achieve. The rationale is that if you have any higher confidence, then you aren’t setting an aggressive enough base plan. Likewise, any lower confidence makes it too risky to be a base plan.

Then, your best-case forecast should be a stretch goal that you have only 10% confidence you can hit. If conditions remained the same as this year—you experienced the same amount of demand, you had the same sales capacity, and competition remained the same—it would be a big stretch.

Finally, your worst-case forecast should be one that you have 90% confidence you can hit. Unless conditions change dramatically, this should be an easy goal for your team.

Try using both approaches to check your plans

While these two approaches may seem different, they should lead you to similar numbers.

Check your calculations against each other. After you’ve calculated your +20% best-case plan, ask if you reasonably have 10% confidence that you can hit it—and then ask if you’re 90% confident that you could achieve your -20% worst-case plan.

If the math doesn’t quite check out for you, now is the time to make changes based on your unique conditions.

Remember, your best- and worst-case plans don’t need to be perfect, and they likely won’t be used outside of the leadership team. They’re just a starting place to get your leadership team thinking critically and talking together about how revenue may change in the coming year.

Looking for more confidence in your revenue data?

Your forecast is only as good as the data that informs it.

With Subscript, it’s easy to measure your revenue data—along with all of your B2B SaaS metrics—in one place. Subscript gives you access to all of your key metrics, including ARR, churn, LTV, and more, in a visually intuitive dashboard. You can quickly find the answers you need for your forecast, without having to spend hours in Excel.